It’s late January, and you’re probably deep in review of your business performance for 2013.
For many spas, 2013 was an erratic year – some ups, some downs. Many spas had revenue performances that were flat or slightly up from 2012. Perhaps the same is true for profits. Across the U.S., spa management teams are looking at the final numbers from 2013 and wondering, “Where did all of that money go?”
If you’re like most spas out there, the answer is probably compensation. As the single biggest expense of operating a spa business, your compensation plan deserves close examination. Judging from the results of the recent DSA compensation survey, our industry offers an array of compensation plans that are limited only by one’s imagination. While many industries, such as retail or hospitality, have fairly consistent practices from property to property, the beauty industry does not.
This situation has its pros and cons. One con is that it’s difficult to see which plan is most effective. On the pro side, it means that spa management has a great deal of flexibility when designing a plan. We don’t need to copy what everyone else is doing. And yet that’s what ends up happening too often.
Owners have an idea of what their competitors pay if they were once a practitioner elsewhere, so they put a similar plans in place for their own business. But without a strategic review of your competitor’s income statement, you may be copying something that doesn’t really work out of habit to negative results. When asked about the overall cost of their compensation plans, many spa owners don’t include all of the components, and there are a lot of them!
A spa that pays technicians 40% treatment commission will say their comp plan costs 40%. However, that doesn’t begin to cover the total costs of labor to the business. For example, many progressive spas with competitive technician wages create budgets for the right number of support staff and offer benefits comparative to those found in the corporate world. Those true costs need to be assessed before any new compensation strategies are formed.
Remember, even five percentage points saved is five more points of profit you can use to sustain business growth and ensure longer-term job security for your staff.
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